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A Budget for sustainable growth

This is a Budget with three principle goals. It wants to revive the flagging domestic investment, which has threatened to turn turtle. It does this by ramping up public capital expenditure by a whopping 24.5% in the hope that it will ‘crowd in’ private investment; cutting corporate income tax rate from 30% to 25% for SMEs with an annual turnover of less than ₹50 crore; and taking further steps in improving the ease of doing business.

Secondly, it responds to the dire requirement for urgently generating a large number of employment opportunities for the increasingly restive youth. The massive push to affordable housing with its vast backward linkages in the economy and high employment intensity will contribute to achieving this goal. The special package for textiles and some other labour-intensive sectors will also help as will the enhanced allocation to infrastructure sectors. The tax relief for SMEs will also help.

Third, it aims at cleansing the economy of black money flows and illegal incomes, thereby sharply squeezing the scope and space for the parallel economy. Following the enactment of the Benami Properties and Illegal Income Acts and demonetisation, the Budget has announced a direct attack on the fountainhead of political corruption by reducing the amount of individual donations to political parties to a paltry ₹2,000, as recommended by the Election Commission. This, as the Finance Minister remarked during his speech, would create a new normal that would attract global investor attention and put the economy on a robust trajectory of rapid, sustainable and inclusive growth.

These are commendable objectives and the Modi-Jaitley duo should be complimented for refraining from populist temptations, which would have been rather strong in the face of impending elections in five States.

New initiatives

The Budget also has three firsts to its credit. By presenting it on February 1, the Finance Minister has ensured that the rather inefficient practice of ‘vote on account’ will be avoided and the finance bill will now be approved by the end of the present fiscal year. Second, the somewhat spurious and dysfunctional distinction between plan and non-plan expenditure has been done away with, which will permit a clearer distinction between the share of capital and revenue expenditure. It is pertinent to note here that by allowing fiscal deficit to rise to 3.2% of the GDP in 2017-18 while bringing down revenue deficit to 1.8% (instead of 2% as recommended by the FRBM committee), the FM has displayed commendable sagacity and responsibility towards the priority of promoting investment and employment. As its third new initiative, this Budget has done away with the colonial legacy of a separate Railway Budget.